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When you leave a job, you decide what happens to its 401(k). A 401(k) financial advisor at Dimov Tax sets out each choice before you move any money.
Under the rule of 55, the IRS drops the 10% early withdrawal tax on a 401(k) when you leave its employer in or after the year you turn 55.
Source: IRS, exceptions to tax on early distributions, checked October 2026
| Option | Fees and funds | Tax and access |
|---|---|---|
| Leave 401(k) with old employer | Same fund menu and fees, if the old employer allows it | No tax; you keep any rule of 55 access |
| Move it to your new plan | Its menu and fees, if the new employer accepts rollovers | No tax on a direct rollover |
| Roll it to an IRA | The IRA provider sets the fund range and fees | No tax on pretax money in a traditional IRA; you lose rule of 55 access |
| Cash it out | Taxable cash outside any retirement account | Tax on the taxable part, plus 10% before 59½ without an exception |
In a direct rollover, the plan administrator pays the new account and withholds nothing. In an indirect rollover, the administrator pays the owner and withholds 20%. The owner has 60 days to deposit the full amount, or the IRS taxes any part the owner keeps. Figures assume $100,000 and federal withholding only.
$100,000, nothing withheld
IRA or new plan$80,000 to you, $20,000 withheld
IRA within 60 days: $100,000, $20,000 from other fundsOwners can roll pretax to a traditional IRA and after-tax to a Roth IRA at once.
From 73 (75 if born after 1959), owners can’t roll over non-Roth minimums.
Roll the deducted sum over by that year’s return due date, with extensions.
Send the latest statement for each old 401(k), so the planner sees each balance and any loan.
As your 401(k) financial advisor, Achim von Bodman, CFP®, compares what each option costs and when you can reach the money.
Our CPAs report each move from Form 1099-R, the distribution record the old plan’s administrator sends.
Our team includes CPAs and Enrolled Agents who work on individual returns, business taxes and tax planning. Tell us what you need help with when you get in touch.
You see your 401(k) advisor’s fee upfront; Dimov Tax sets it by the depth of the review and any ongoing support.
You can lose money when you invest. Dimov Tax gives general information here, not investment, tax or legal advice for your situation.
